Class: Intro to Business Class

You are writing a reply to forum posts made by my classmates.

2 replies. 200-words in each reply. 

The main forum post[1] is at the bottom.

What you are replying to:

First Reply:

What sort of difficulty can you imagine the manager of an organization would be in if the organization did not routinely prepare cash flow forecasts and working capital analyses? 

One of the worst things that can happen to a company is to run out of cash and cash equivalents, and even worse if they don’t realize it. Say a company is in dire need of a piece of equipment and the Accounts Payable Manager writes a check for the full value and the CFO signs it, and the equipment company picks it up and drops off the asset. The next day, that same company comes by and picks up the equipment and explains that the check bounced. What? That can’t be! Well, yes it can if you don’t have a routine Cash Flow Analysis that explains how liquid you are or are not.  

That scenario would be even worse if it involved payroll checks as the employees line up at the Controller’s office wanting an immediate solution. The cash budget isn’t the resolution as not all of the customers paid on time, or an unexpected cash outlay occurred that dried up all of the cash. The resolution is a Cash Flow Analysis that pinpoints at any time exactly how much cash is available for use now and in the foreseeable future (to avoid “gotcha’s”).  

Some companies are fortunate to have a line of credit to cover overdrafts of cash/credit as backup for operating expenses, but the finance charges are evil. Just as you don’t want to come up short of cash, you also don’t want a glut of cash sitting around slumbering. It takes an experienced Financial Manager to know the nuances of cash flow. 

Second Reply:

A cash flow forecast is a computation which permits a business to anticipate how much cash they will have at a specific time sooner rather than later. It considers anticipated costs just as pay, which then, at that point permits the manager to find out about what their benefit will be. A working capital analysis is a significant piece of this, as it builds up the current resources and liabilities of an organization. This permits the administrator to perceive how much cash the organization as of now has accessible to spend. Setting up a cash flow forecast and a working capital analysis is a dependable method to deal with the monetary condition of the organization. In the event that a supervisor of an association doesn’t perform ordinary cash flow analysis and working capital analysis, the administrator may wind up in serve monetary troubles accordingly. Now and again this could cause for some business to have a scaled back workers, which implies more slow creation and generally more cash lost on the off chance that they can not stay aware of the interest of its clients.

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[1] Initial Forum Question: 

What sort of difficulty can you imagine the manager of an organization would be in if the organization did not routinely prepare cash flow forecasts and working capital analyses?